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Exhibit 10.5.2.3
PRIVILEGED AND CONFIDENTIAL
SUBJECT TO FRE 408
Separation Agreement and General
Release
1. Your Employment
Agreement.
This Separation Agreement and
General Release (the "Separation Agreement") relates to your
Employment Agreement dated as of January 30, 2006, and as
amended from time to time, with Calpine Corporation, a California
corporation, (the "Company") (the "Employment Agreement"). The
Company and its affiliates, including without limitation those
affiliates that are affiliated debtors in possession in the
Company’s Chapter 11 cases, shall be sometimes
hereinafter referred to as the "Group." This Separation Agreement
is made as of this 16th day of February 2007 by and among the
Company and SCOTT J. DAVIDO ("Executive," and together with the
Company and the Group, "the Parties").
WHEREAS, Executive has been
employed by the Company under terms set forth in the Employment
Agreement; and
WHEREAS, Executive’s
employment with the Company has ended by Executive’s
resignation (the "Separation") effective as of February 16,
2007 (the "Separation Date"); and,
WHEREAS, the Parties desire to
enter into this Separation Agreement in order to set forth the
definitive rights and obligations of the Parties in connection with
the Separation.
NOW, THEREFORE, in consideration
of the mutual covenants, commitments and agreements contained
herein, and for other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the Parties
intending to be legally bound hereby agree as follows:
2. Acknowledgment of
Separation . The Parties acknowledge and agree that the
Separation is effective as of the Separation Date.
3. Resignation of
Office . Effective as of the Separation Date, Executive
voluntarily resigns his position as Chief Restructuring Officer of
the Company, and from any and all other offices (or other
positions) which he holds at the Company and any member of the
Group.
4. Executive’s
Acknowledgment of Consideration . Executive specifically
acknowledges receipt of consideration for waiver of any obligations
or payments due under his Employment Agreement, and for the
remaining obligations and payments which relate to the Separation
which were agreed to by the Parties upon entering into the
Employment Agreement.
5. Payments and
Benefits Upon and After the Separation .
(a)
Final Pay . On the next regular payroll date following the
Separation Date, Executive shall receive a lump sum payment of all
then-outstanding final wages and accrued unused vacation, plus any
expenses incurred prior to the Separation Date that are
reimbursable pursuant to the Company’s relevant expense
reimbursement policies, minus applicable federal, state and local
tax withholdings, for services performed for the Company through
and including the Separation Date.
(b)
2006 Earned, but Unpaid Bonus . On or before March 15,
2007, Executive shall receive a lump sum payment of his minimum
Bonus (as defined in the Employment Agreement) for the fiscal year
ending December 31, 2006. Pursuant to Section 3(b)(i) of
the Employment Agreement, such Bonus will equal $700,000 and be
paid prior to March 15, 2007.
(c)
COBRA and COBRA Premium Payments . For a period of eighteen
months following the Separation Date, the Company shall, at its
sole cost and expense (but disregarding any individual tax
liability of Executive), and at the election of continuation health
coverage by the Executive pursuant to the provisions of
Section 4980B of the Internal Revenue Code of 1986, as amended
("COBRA"), provide Executive (and his spouse and eligible
dependents) with group health benefits substantially similar to
those benefits that Executive (and his spouse and eligible
dependents) were receiving immediately prior to the Separation Date
(which may at the Company’s election be pursuant to
reimbursement of the applicable COBRA premium). Such coverage shall
be provided to Executive as COBRA benefits and shall terminate
prior to the eighteen month period if Executive, his spouse or
eligible dependents are no longer eligible for COBRA coverage or
are otherwise provided with similar group health benefits from
another source. To the extent possible, the payment of
Executive’s (and his spouse’s and dependents’)
COBRA coverage shall be made in a tax efficient manner for the
Executive so long as there are no adverse tax consequences for the
Company.
(d)
Guaranteed Minimum Success Fee . The Parties agree that
Executive shall receive a payment equal to 1.5 times
Executive’s base salary (i.e., $700,000) as of the Separation
Date in lieu of the Guaranteed Minimum Success Fee set forth in
Section 3(f)(i) of the Employment Agreement. Subject to the
timing rule set forth in Section 3(f)(ii) of the Employment
Agreement and any other provisions of Section 409A of the
Internal Revenue Code, payment of this Guaranteed Minimum Success
Fee shall not be accelerated and shall be paid ratably on a monthly
basis over a period of 18 months. If Executive:
(i) becomes employed, provides consulting, independent
contractor, or similar services, serves as a director, or is a
partner in any business enterprise; or (ii) is in any way
entitled to any current or future form of compensation or
remuneration, in each such case (i) through (ii) in any
manner or capacity after the Separation Date, he shall forfeit
those payments of the Guaranteed Minimum Success Fee due in the
13th through the 18th months. For the avoidance of doubt, the
Parties expressly acknowledge that the preceding sentence shall be
given the broadest possible interpretation for the benefit of the
Company.
(e)
Relocation Expenses . The Company shall pay Executive the
relocation expenses set forth in Section 3(g) of the Employment
Agreement for periods up to and ending on the Separation Date. Such
payments shall be made by March 15 of the calendar year after
the calendar year in which the expenses were incurred (as set forth
in Section 3(g) of the
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Employment Agreement). The Company shall also remain obligated
to make any gross up payments in respect of these relocation
payments as provided under Section 3(g) of the current Employment
Agreement. Relocation expenses of Executive shall include all
reasonable expenses associated with moving the personal effects of
Executive back to his home in Minnesota, or any other location in
the continental United States, including travel expenses related
thereto. Relocation expenses of Executive shall also include all
reasonable expenses related to the termination or early termination
of Executive’s residential lease obligations; provided
that , Executive gives the Company the opportunity to assume
any existing residential lease obligations (including furniture
rental obligations) prior to termination or early termination of
such obligations.
(f)
Legal Fees . On or before March 1, 2007, the Company
shall pay Executive’s reasonable legal fees that were
incurred in connection with the prior Amendment of the Employment
Agreement, and were due to be paid by the Company no later than
January 31, 2007, but remain unpaid,
(g)
Excise Tax . The Company shall pay the Executive the
"Gross-Up" as defined in Section 6 of the Employment Agreement
on the terms and on such dates as are set forth in Section 6
of the Employment Agreement.
6. Waiver of Certain
Payments Upon and After the Separation
(a)
Success Fee . Executive agrees to waive payment of the
Success Fee, as defined in Section 3(e) of the Employment
Agreement, to the extent such Success Fee would be payable under
the Employment Agreement.
(b)
Guaranteed Minimum Success Fee . Executive agrees to waive
payment of the portion of the Guaranteed Minimum Success Fee that
is not paid pursuant to Section 5(d) of this Separation
Agreement.
(c)
Waiver of Right to Recoup Signing Bonus . The Company agrees
to waives any right, under section 3(d) of the Employment Agreement
or otherwise, to recoup any portion of the signing bonus paid to
Executive.
7. Confidential
Information; Non-Competition; Non-Solicitation;
Non-Disparagement .
(a)
Confidential Information . Executive acknowledges that the
information, observations and data obtained by him concerning the
business and affairs of the Company during the course of his
employment with the Company, or that may be obtained in connection
with his assistance and cooperation with the Company, is the
property of the Company. Executive agrees that he will not,
directly, willfully or negligently disclose to any unauthorized
person or use for his own account any of such information,
observations or data ("Confidential Information") without the
Company’s written consent, unless, and to the extent, that
(i) the aforementioned matters become generally known to and
available for use by the public other than as a result of the
Executive’s acts or omissions to act, or (ii) he is
required to do so by order of a court of competent jurisdiction (by
subpoena or similar process), in which event Executive shall
reasonably cooperate with the Company in connection with any action
by the
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Company to limit or suppress such disclosure. Executive
represents, warrants and covenants that at no time prior to or
contemporaneous with his execution of this Agreement has he,
directly, willfully or negligently disclosed Confidential
Information to any unauthorized person or used such Confidential
Information for his own purposes or benefit. Executive acknowledges
his understanding of his non-competition, non-solicitation,
non-disclosure and non-disparagement restrictions as set forth in
the Employment Agreement. Executive understands that his breach of
this Section 7 shall eliminate his entitlement to any benefits
or payments under this Separation Agreement, including such
payments already received and, with respect to payments received,
Executive shall be required to immediately return any such amounts
in the event of a breach.
(b)
Non-Competition; Non-Solicitation; Non-Disparagement .
(i)
Non-Competition . The Company has agreed to waive the
non-competition provisions of Section 5 (a) of the
Employment Agreement; provided, however, that without the
Company’s express prior written consent, provided,
however, that , the Company’s express prior written
consent shall not be unreasonably withheld, Executive agrees that,
for the period from the Separation Date to the date that is
18 months after the effective date of the Company’s
confirmed Chapter 11 plan of reorganization, Executive shall
not directly or indirectly manage, operate, participate in, be
employed by, perform consulting or advisory services for, or
otherwise be connected in any way with any party-in-interest (at
any time) in the Group’s Chapter 11 cases, including
without limitation any creditor, or holder of any securities, of
the Company (or its affiliates), any official or unofficial
committee in connection with such Chapter 11 cases, or any
advisor to such parties-in-interest, or any affiliates or
related-entities of the foregoing.
(ii)
Non-Solicitation . During the Term of Employment and
for an 18 month period after termination of Executive’s
employment, Executive will not directly or indirectly solicit or
attempt to solicit anyone who, at the time of the termination of
Executive’s employment, is then an employee of the Group (or
who was an employee of the Group within the six months prior to the
termination of his Employment) to resign from the Group or to apply
for or accept employment with any company or other enterprise.
(iii)
Non-Disparagement . During and after Executive’s
employment with the Company, the Parties mutually covenant and
agree that neither will directly or indirectly
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